USD/TRY: Turkish Lira Falls To Record Lows As Police Arrests Istanbul Mayor

Turkish lira tested historic lows against U.S. dollar as traders reacted to the surprise arrest of Istanbul mayor Ekrem Imamoglu.

Imamoglu is a leading figure in the opposition party and a direct rival to Turkish President Recep Tayyip Erdogan. The opposition party planned to vote for a presidential candidate on March 23, and Imamoglu was viewed as the potential winner.

The charges against Imamoglu include corruption and aiding a terrorist group. According to the reports, more than 100 people were arrested together with Imamoglu. The opposition Republican People’s Party denied the charges.

Mass protests were seen in Istanbul, which is the heart of the Turkish economy. Turkey has suffered from high inflation for many years, and the crackdown on political opponents may trigger another wave of economic problems.

Not surprisingly, investors and traders rushed to sell the lira and Turkish stocks. Traders are worried that political developments will put significant pressure on economic growth. In addition, foreign investors may start to pull capital out of Turkey, which will be bearish for the lira.

The Turkish lira has been steadily falling against the U.S. dollar in recent months. The latest inflation report indicated that Inflation Rate fell to 39.05% in February. High inflation has served as a bearish catalyst for the lira.

Taking a look at the monthly chart, we can see that the lira has been under strong pressure for many years. High inflation erodes the purchasing power of the Turkish currency, and investors demand high yields to stay in lira-denominated assets.

Political problems in the country may force investors to sell Turkish assets and send the lira to new lows. There has been a single trend on the USD/TRY chart for many years, and this market setup will not be changed anytime soon. The lira will continue to lose its value against the U.S. dollar and other stable currencies.

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